Natural Gas Weekly Update

In the News:

Below normal temperatures last week increased natural gas consumption

Between December 24, 2017, and January 3, 2018, daily temperatures in the Lower 48 states averaged 27° Fahrenheit (F), which was 9°F lower than the 30-year (1981–2010) average for the same period. Daily temperatures reached a maximum departure from normal of 18°F below normal on January 1, 2018. By comparison, in the winter 2013–14, which had very cold temperatures as a result of several polar vortexes, the national average maximum departure from normal was 16°F below normal on January 7, 2014. National Oceanic and Atmospheric Administration forecasts the colder-than-normal weather to persist through January 7, 2018.

Estimated total natural gas consumption posted a new single-day record on January 1, 2018, topping the previous record set on January 7, 2014. Total estimated consumption provided by PointLogic, which includes power burn, industrial, residential/commercial, and pipeline and liquefied natural gas (LNG) feedstock gas, reached 150.7 Bcf on January 1, compared with the previous high of 143.3 Bcf set in 2014.

PointLogic’s estimated residential and commercial use of natural gas spiked to 73.3 billion cubic feet (Bcf) on New Year’s Day. This appears to be the largest daily residential and commercial consumption of natural gas since January 7 and 28, 2014. However, residential and commercial consumption may not have actually posted new record levels on New Year’s day, but increased exports of natural gas to Mexico and LNG feedstock gas, which did not occur in 2014, significantly contributed to this week’s apparent record U.S. load.

Some regional natural gas prices were affected by the weather. Prices for December 29, 2017, delivery reached $64.49 per million British thermal units ($/MMBtu) at the Northern Natural Ventura trading hub in Hancock County, Iowa, on news of a critical day notice from Northern Natural Gas. This price exceeded the previous record of $55.62/MMBtu for January 28, 2014 delivery. Statewide average temperatures in Iowa were 20°F degrees below normal for the period from December 24, 2017 to January 3, 2018—the largest departure from normal in the Lower 48 states for the same time period. Prices at the Algonquin Citygate and Transco Zone 6 NY trading hubs, the hubs that serve the greater Boston and New York City markets, were higher than $30.00/MMBtu.

Overview:

(For the Week Ending Wednesday, January 3, 2017)

Natural gas spot prices rose at most locations this report week (Wednesday, December 27 to Wednesday, January 3) as cold weather affected much of the country. The Henry Hub spot price rose from $2.75 per million British thermal units (MMBtu) last Wednesday to $6.88/MMBtu yesterday.

At the New York Mercantile Exchange (Nymex), the January 2018 contract expired last Wednesday at $3.008/MMBtu. The February 2018 contract price increased 28¢ Wednesday to Wednesday, closing at $3.008/MMBtu yesterday.

Net withdrawals from working gas totaled 206 billion cubic feet (Bcf) for the week ending December 29. Working natural gas stocks are 3,126 Bcf, which is 6% less than the year-ago level and 6% lower than the five-year (2012–16) average for this week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 12¢, averaging $8.49/MMBtu for the week ending January 3. The price of natural gasoline, ethane, propane, and isobutane rose by 1%, 8%, 1%, and 2%, respectively. The price of butane fell by 2%.

According to Baker Hughes, for the week ending Tuesday, December 26, the natural gas rig count decreased by 2 to 182. The number of oil-directed rigs remained constant at 747. The total rig count decreased by 2, and it now stands at 929.

Prices/Supply/Demand:

Prices rise across the country with cold weather. This report week (Wednesday, December 27 to Wednesday, January 3) saw extended cold temperatures across the East, South, and Central parts of the country. The Henry Hub spot price rose $4.13 from $2.75/MMBtu last Wednesday to $6.88/MMBtu yesterday. The major increase in Henry Hub prices occurred after the holiday weekend, when prices increased $3.04 from $3.58/MMBtu for natural gas delivery over the holiday weekend to $6.62/MMBtu on Tuesday.

At the Chicago Citygate, prices increased $3.33 from $3.16/MMBtu last Wednesday to $6.49/MMBtu yesterday, after reaching a high of $9.01/MMBtu on Tuesday. Prices at PG&E Citygate in Northern California rose 19¢, up from $2.89/MMBtu last Wednesday to $3.08/MMBtu yesterday. The price at SoCal Citygate increased $2.99 from $3.16/MMBtu last Wednesday to $6.15/MMBtu yesterday. Although some of the maintenance on SoCal gas lines has been completed, some lines are still undergoing maintenance, according to SoCalGas.

Northeast prices rise significantly. Prices in the Northeast rose as cold weather persisted and as the area anticipated the arrival of Winter Storm Grayson. At the Algonquin Citygate, which serves Boston-area consumers, prices went up $15.93 from $22.29/MMBtu last Wednesday to $38.22/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased $31.84 from $16.54/MMBtu last Wednesday to $48.38/MMBtu yesterday.

Nymex prices increase. At the Nymex, the January 2018 contract expired last Wednesday at $3.008/MMBtu. The February 2018 contract price increased 28¢ Wednesday to Wednesday, closing at $3.008/MMBtu yesterday. The price of the 12-month strip averaging February 2018 through January 2019 futures contracts increased 13¢, Wednesday to Wednesday, to $2.880/MMBtu.

Supply falls slightly. According to data from PointLogic Energy, the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production decreased by 4% compared with the previous report week; well freeze-offs (when liquids in well piping freeze and block natural gas flows) were reported in some parts of the country. Average net imports from Canada increased by 32% from last week, as cold temperatures affected the Northeast and Midwest.

Demand increases significantly. Total U.S. consumption of natural gas rose by 26% compared with the previous report week, as cold temperatures affected much of the country. Total U.S. consumption reached an all-time high on January 1, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 18% week over week. Industrial sector consumption increased by 8% week over week. In the residential and commercial sectors, consumption increased by 39%. Natural gas exports to Mexico decreased 5%.

According to Bloomberg, Sabine Pass finished 2017 with its highest monthly export total. In December, 25 tankers left the terminal, exceeding the previous monthly highs of 22 tankers in October and November. The Cove Point LNG export facility in Lusby, Maryland is continuing commissioning work with commercial operations anticipated early this year.

Storage:

Withdrawals from working gas were more than double the five-year average. Net withdrawals from storage totaled 206 Bcf for the week ending December 29, compared with the five-year (2012–16) average net withdrawal of 99 Bcf and last year's net withdrawals of 76 Bcf during the same week. Working gas stocks totaled 3,126 Bcf, which is 192 Bcf less than both the five-year average and last year at this time.

Falling temperatures result in increased withdrawals of natural gas from storage. Colder weather throughout the Lower 48 states during the storage week resulted in increased consumption of natural gas. Substantial increases in natural gas consumption in the power, industrial, and residential/commercial sectors during this storage week resulted in withdrawals from storage in every region of the Lower 48 states. Storage withdrawals exceeded the five-year average rate in each of the storage regions. As a result of these broad-based withdrawals from storage, working gas stocks are now below the five-year average in all five regions in the Lower 48 states for the first time in 2017.

The near-month futures contract trades at a discount to the current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.76/MMBtu, 2¢ higher than the front-month futures price at the Nymex. A year ago, the spot price was 10¢ lower than the front-month contract. The spot price for natural gas climbing above the futures price for natural gas provides economic incentives to withdraw natural gas from storage.

Reported net implied flows out of storage were near the lower end of analysts’ expectations, prices on the Nymex fall following the release of the Weekly Natural Gas Storage Report. According to the Desk survey of natural gas analysts, estimates of the weekly net change in working natural gas storage ranged from net withdrawals totaling 205 Bcf to 235 Bcf, with a median net withdrawal of 220 Bcf. Prices for the futures contract for February delivery fell about 2¢/MMBtu, averaging $3.02/MMBtu, at the release of the Weekly Natural Gas Storage Report, with 584 contracts traded. Prices exhibited considerable variation in subsequent trading falling to $2.98/MMBtu before climbing back above $3.00/MMBtu.

Temperatures were lower than normal in most of the Lower 48 states during the storage week. Temperatures in the Lower 48 states averaged 32 degrees Fahrenheit (°F), 2°F lower than the normal and 10°F lower than last year at this time. Temperatures in the heavy natural gas-consuming areas of the Midwest and Northeast were significantly colder than normal, contributing to an increased demand for natural gas. Temperatures in the Mountain and South Central Census divisions were also colder than normal.